Abstract:
The study analyzes the benefits of tax incentive on the growth of small and medium-sized
enterprises (SMEs) in Ethiopia, taking SMEs in Ambo town as a case study. In this SMEs growth
is hindered by the challenges of lack of financial resources to expand, the entrepreneur
managerial skills/attitudes, inadequate infrastructural facilities and above all unpleasant
taxation policy of the government. In the light of all these, this study reviews the role being
played by various governmental tax incentives on the growth of SMEs. The study employed
descriptive research design and inferential statistic thus; primary data was collected on
variables contributing to tax influence and their benefits on the growth of SMEs. The purpose of
this study has been to analysis tax incentive and the growth of SMEs at Ambo town. A sample of
230 was collected from owners and organization on the growth of SMEs at Ambo town during
Descriptive statistical measures, chi square and binary logistic regression model were used for
the analysis in the study. The result of the study disclose that majority of SMEs (79.1%) them did
benefits from tax incentive but only around (20.9%) of SMEs were not benefits from tax
incentive, Out of the SMEs who have benefits from tax incentives, 50 % and 29.13 % were male
and female respectively. The log odd that who benefits using tax incentive for the growth of
SMEs in the Diploma increased by 33% as compared to primary school controlling variables.
Therefore, it is more advisable if Government and tax authorities should carefully consider and
revisit the benefits of tax incentive policy to determine effective types of tax incentive and its
implementation. It is better in encouraging SMEs should be educated on the importance and
benefits for them to apply for the tax incentive.
